Former television presenter Christa Ackroyd, who was engaged by the BBC through a personal service company (PSC), should be taxed as an employee under the employment intermediaries legislation, according to tribunal ruling in the UK.
The Upper Tribunal dismissed an appeal against a decision of the First-tier Tribunal (FTT).
Christa Ackroyd presented 'Look North' on BBC 1 until 2013. She was engaged to provide presenting services through her company Christa Ackroyd Media Ltd (CAM) under a fixed term contract. The FTT found that the arrangements, which lasted for seven years and required Ackroyd to personally provide services 225 days a year, "point[ed] towards a contract of employment".
The aspects of the relationship between Ackroyd and the BBC which the FTT found relevant when coming to its decision were the BBC's control over Ackroyd's work; the lack of a right to substitution; the fact that the BBC had the contractual right to require Ackroyd to deliver 225 days worth of services, and that the contract restricted Ackroyd from working for anyone other than the BBC without its consent. It also considered that Ackroyd could not "fairly be described as being in business on her own account".
The Upper Tribunal considered the FTT's decision and found that the FTT had made no errors of law in concluding that the BBC had sufficient control over Ms Ackroyd to mean that an employment relationship would have arisen if the services had been directly supplied.
"The decision is not surprising and illustrates the difficulty of showing that 'control' is not present, especially where an engagement is lengthy," said Penny Simmons, a tax expert at Pinsent Masons, the law firm behind Out-law.com.
The employment intermediaries rules, known as IR35, require that employment taxes and national insurance contributions (NICs) be paid in respect of a person who provides services through a PSC if that person would have been regarded as an employee of the engaging business if they had engaged directly with the business.
Before 2017 liability to decide whether IR35 applied to the engagement of a contractor through a PSC rested with the PSC if the employer was a public sector organisation such as the BBC., engaged a contractor through a PSC. The obligation to pay any employment taxes also rested with the PSC.
From April 2017 public sector employers became responsible for deciding the employment tax status of contractors they engaged through PSCs and to apply PAYE and for paying employer's NICs if the individual would have been an employee if engaged directly by the public sector body.
Last year a National Audit Office report highlighted the difficulties that the BBC had in determining the employment status of the large number of freelance contractors it engaged when the rules changed for off-payroll working in the public sector.
Earlier this year HMRC lost an FTT case in which it claimed that presenter Kaye Adams's PSC should have applied IR35 rules to payments made by the BBC for presenting a radio programme. It also lost a case concerning TV presenter Lorraine Kelly, where the FTT found that the services Kelly provided for ITV were the equivalent of those of a 'theatrical artist', who did not "appear as herself" but rather as "a persona of herself…the act being to perform the role of a friendly, chatty and fun personality".
However, in September the FTT ruled in favour of HMRC in a case concerning the tax status of three BBC journalists engaged through PSCs, deciding that there was "sufficient mutuality and at least a sufficient framework of control" in the relationships between the BBC and the presenters that they should be treated as employment relationships, rather than cases of self-employment.
In the private sector the responsibility for applying IR35 currently falls on the PSC. However from April 2020 the private sector rules are changing so that responsibility for determining status will pass to the business which engages the contractor through the PSC.
"As the different decisions in these cases illustrate, employment status cases are very fact-specific. As well as looking at what the contracts say, you have to look at how the individual is actually treated in practice," Simmons said.
"For private sector businesses engaging contractors through PSCs, these cases show the challenges of working out employment tax status, particularly where a large number of contractors are concerned, perhaps with slightly different roles and operating in different parts of the business," she said.
According to press reports, some banks have informed contractors that they will not extend the contracts of contractors who provide their service through PSCs. This will mean that they will not need to determine the employment status of those contractors.
"Any business which engages individuals through PSCs needs to ensure it has the systems in place to determine the IR35 status of its contractors, before the rules change in April," Simmons said.;
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